Chapter One: Barter
Chapter One
Barter
Abstract: Because the opportunity cost of a good cannot be fixed, it is impossible to know the proper exchange ratios for barter. This problem is overcome in the market by using commodities that have marketable characteristics, such as transportability, durability, and a recognized economic value, to serve as a medium of exchange. Prices of goods do not strictly follow the quantity theory of money.
Chapter Two: Market Prices
Chapter Two
Market Prices
Abstract: Market prices are determined by the bargaining between suppliers and demanders. Price determination by supply and demand is illustrated with a thought experiment that uses a fixed quantity of a perishable product (i.e., green peas) and known maximum valuations of consumers.
Chapter Three: The Circulation of Money
Chapter Three
The Circulation of Money
Abstract: Farm production produces three rents, one of which sustains the farm workers, while the other two can be sold at wholesale to entrepreneurs who in turn provide property owners and farmers with goods and merchandise. This is the circular flow model of the economy. Money facilitates the flow and timing of rent payments (i.e., “velocity”) and the rate of the monetary flow determines the ratio between the quantity of money and the value of annual production.
Chapter Four: Further Reflection on the Rapidity or Slowness of the Circulation of Money in Exchange
Chapter Four
Further Reflection on the Rapidity or Slowness of the Circulation of Money in Exchange
Abstract: Large transactions can be accomplished with the use of bills of exchange or barter, which reduces the demand for money. Ordinary transactions by people require actual coin money in circulation. A variety of factors, therefore, affect the flow of money in circulation and this in turn affects the amount of money in circulation.
Chapter Five: The inequality of the circulation of hard money in a State
Chapter Five
On the Inequality of the Circulation of Money in a State
Abstract: Rural France was impoverished because commodities had to be sent to the capital and major cities to pay taxes to the state and rents to the property owners living there. It is argued here that if factories were permitted in rural areas, basic commodities could be turned into goods, which could then be sent to the cities at a much lower transport cost. This would save resources in transportation and benefit both rural populations and property owners.
Chapter Six: The increase and decrease in the quantity of hard money in a State
Chapter Six
The Increase and Decrease of the Quantity of Money in a State
Abstract: Here Cantillon uses his price-specie flow mechanism to analyze some of the effects of inflation. Increasing the supply of money by mining hurts some people and benefits others because certain prices and incomes rise faster than others. However, if the new money is accumulated and saved by those who successfully export goods, either because of superior quality or more efficient transportation, it will lead to higher standards of living.
Chapter Seven: Continuation of the same subject
Chapter Seven
More on the Increase and Decrease in the Quantity of Money in a State
Abstract: When there is an increase in the quantity of money, prices will increase depending on how the new money holders decide to spend their money. The price changes will also be affected by such things as regulations on trade and the perishability of the products that are traded. In other words the simple quantity theory of money is naïve in proposing that a doubling of the quantity of money would double all prices equally.
Chapter Eight: Further Reflection on the same subject
Chapter Eight
Further Reflections on the Increase and Decrease of Money in a State
Abstract: Increases in the supply of money from a balance of trade eventually causes prices to rise. This in turn puts pressure on domestic producers and increases imports. The result is that the balance of trade is reduced and eventually is negative. This is Cantillon’s price specie-flow mechanism which demonstrates the reasons for the tendency for equilibrium in international monetary flows.
Chapter Nine: The Interest of Money and its Causes
Chapter Nine
Interest on Money and its Causes
Abstract: Interest is established in the market by lenders and borrowers and the interest rate on a particular loan is determined by the risk of default. A loan is repaid from the income generated from capital investments and the interest paid is equivalent to the profits of fully capitalized enterprises. Small entrepreneurs pay high rates whether they borrow cash or purchase goods to be paid at a later date, based on risk and their propensity to spend beyond their means.
Chapter Ten: The Causes of the Increase and Decrease of the Interest of Money in a State
Chapter Ten
The Causes of Increases and Decreases of the Interest Rate on Money in a State
Abstract: The interest rate is determined by the supply and demand for loanable funds, not the supply of money. Savings and frugality decrease the interest rate while lavish spending increases it. War increases the interest rate, peace decreases it. Paying off the national debt decreases the interest rate. A positive balance of trade decreases the interest rate, but the government cannot effectively lower the interest by a usury law.
